We are considering buying a block of flats in Liverpool..

It is in a good area. It is not cheap but it is a purchase governed by an expectation of capital growth. There are 11 flats for a price of £525,000 and with a rent roll of just under £50,000. So, the yield is very much at our lower end. It is a purpose-built block with a car park for 9 cars. The flats are not that large and are mainly 1 bed. It is relatively well maintained although it will need some work to be up to date with current health and safety standards

We have studied it closely and done our research. For some reason though I am not convinced. It is in a good area. It has genuine Tenants and will provide income from day 1. It does not need a lot of work. If Liverpool keeps improving, then this property should go up in value. It is near the major development known as Liverpool Docks 2 and near to Cosby Beach in an up-market part of town.

But the yield is low so what really justifies it is capital growth

We have been to the Bank because on this property we are buying with a mortgage.  We have had a survey and it has valued well and on this occasion, we are going to get a much higher loan to value than we normally get on our remortgages That is a promising sign

Less promising is a discussion I have had with the Seller about payment of rent arrears. It seems he has £6,000 or more of arrears that he thinks we should pay. This is a discussion you often have with Sellers. They say you will be inheriting the right to collect this money so you should pay me and then do so. But my argument is why are there arrears? Surely that is a bad thing not a good one. For all we know we will inherit a Tenant who stops paying altogether and then we find it takes 4 to 6 months to get possession and we have no rent for that period. It is adding insult to injury to be paying that Tenant’s back rent to the Seller as well.

After various discussions, the Seller backs down and accept we can collect rents due. But the fact we have had to have this discussion leaves me uneasy

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